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Authored by Chris Hamilton via Econimica blog,

The decelerating growth and/or outright decline of the working age population is clearly visible in every part of the world. This article details where the deceleration began and the extent of the decelerations / declines. The reason this is so important is that the majority of economic growth is driven by the rising demand represented by the growth of the working age population (and their increasing quantity of employed persons). But not just the rise of any population, but those of means, those with savings, and those with access to credit.  This growth drives mega infrastructure projects, buildouts of supply chains, increased production, and ultimate rise in consumer demand. Absent that population growth (particularly among those with means) governments have been “building bridges to nowhere”, “building ghost cities”, providing “lower for longer”, ZIRP, NIRP, and monetizing debt, etc. etc.  This is all ultimately a fools errand only worsening the ultimate reorganization.

Why?  The working age populations earn and spend about double of those on fixed incomes among the elderly populations.  The working age populations are at full employment and little to no further growth in employment is possible (detailed, HERE).  Elderly utilize little to no credit and focus on paying off their debts…thus despite low rates, money velocity will keep on tanking.  The declining interest rates, rising debt, and ever greater centrally controlled markets are the flip-side of the charts I show below.  The below charts all show the ten year change of the 20 to 65 year old population (and percentage change in that working age population divided by total working age population) versus the same for the 65+ year old populations.  Deceleration and outright decline are the universal among all the charts.

INDIVIDUAL NATIONS

JAPAN

• 127 million or 1.6% global population

• 3.4% global energy consumption

• 2020-2030…Working age population decline of 6.5% (-4.5 million)

Patient zero in the epidemic of population collapse, Japan’s negative fertility rates coupled with little to no immigration has Japan leading the race to the bottom. Only Japan’s exports were able to offset the collapsing domestic demand.  Below, working age Japanese population versus the growth of the elderly population. Japan is entering it’s third decade of working age population decline, declining slightly slower than the previous decade before the bottom really falls out from 2030 through 2050.

Percentage change, per 10 years, of working age population versus elderly population. Over the next decade, Japan’s working age population will decline by 7% while its 65+ elderly population will increase by just 4%. Within 20 years, Japan’s elderly population will cease growing and Japan’s population will be in decline at all levels. But tellingly, Tokyo’s population (representing about 30% of Japan’s total population) is still rising meaning the working age population decline across the remainder of Japan’s rural locations is of epic proportions. This collapse of working age across rural locations, as young head to urban centers in search of opportunity, is being mirrored across the rest of the world and is the final act of the economic decline worldwide.

GERMANY

• 84 million or 1.1% global population

• 2.1% global energy consumption

• 2020-2030…Working age population decline of 8% (-4.2 million)

Just behind Japan in long term negative fertility but far more open to immigration, the working age German population versus the growth of the elderly population. Germany’s creation of the Euro area was its means to avoid collapsing domestic demand for its exports by quintupling the market for its exports absent a strong Deutschmark. Of course, Germany’s economic salvation has meant abject economic destruction for most of the Euro nations.

Percentage change, per 10 years, of working age versus elderly.

SOUTH KOREA

• 51 million or 0.7% global population

• 2.2% global energy consumption

• 2020-2030…Working age population decline of -10% (-3 million)

The new poster child for population collapse is South Korea. Just like Japan and Germany, an incredibly urbanized and industrialized export powerhouse. Working age South Korea population change, per decade, versus the growth of the elderly population (below).

Korea’s reliance on global exports is likely unmatched as their domestic population is now and will continue to collapse indefinitely. Below, the percentage change, per 10 years, of working age versus elderly is truly astounding.

CHINA

• 1.43 billion or18.6% of global population

• 24.3% global energy consumption

• 2020-2030…Working age population decline of -8% (-69 million)

China is the elephant in the room with a collapsing working age population versus the gargantuan growth of its elderly population (below).  This chart is 20 to 60 year-olds and elderly 60+ year-olds, as China has compulsory retirement at age 60 for males, 55 for females.

Percentage change, per 10 years, of working age versus elderly.

THAILAND

• 70 million or 1% of global population

• 1% of global energy consumption

• 2020-2030…Working age population decline of -5% (-2.1 million)

Working age Thai population change, per ten years, versus the growth of the elderly population (below).

Percentage change, per 10 years, of working age versus elderly (below).

MEXICO

• 128 million or 1.7% of global population

• 1.4% global energy demand

• 2020-2030…Working age population of +12% (+9 million) but down from decade long peak of +38% (+13 million).  Growth remains through 2050 but only continuing to decelerate.

Working age Mexican population change per decade versus the growth of the elderly population (below).

Percentage change, per 10 years, of working age versus elderly.

IRAN

• 83 million 1.1% global population

• 1.7% energy consumption

• 2020-2030…Working age population growth of +7% (+4 million)…working age growth is decelerating and will turn to depopulation prior to 2040.

Working age Iranian population change, per ten years, versus the growth of the elderly population (below).

Percentage change, per 10 years, of working age versus elderly (below).

BRAZIL

• 211 million or 2.7% global population

• 2.2% global energy consumption

• 2020-2030…Working age population increase of +5% (+6 million) and this is essentially the last decade of working age growth in Brazil.

Working age Brazilian population change, per ten years, versus the growth of the elderly population (below).

Percentage change, per 10 years, of working age versus elderly (below).

INDIA

• 1.37 billion or 17.7% global population

• 5% global energy consumption

• 2020-2030…Working age population growth of +14% (+110 million), decelerating from +30% and +137 million in earlier decades.  Working age growth continues decelerating through 2050.

Working age Indian population change, per ten years, versus the growth of the elderly population (below).

Percentage change, per 10 years, of working age versus elderly (below).

REGIONS

East Asia (China, S/N Korea, Japan, Taiwan, Mongolia)

• 1.67 billion or 22% of global population

• 31% of total global energy consumption

• 2020-2030…Working age depopulation of -8% (-80 million)

Working age (20 to 60 year-olds) East Asia population change, per ten years, versus the growth of the elderly population (60+ year-olds, below).

Percentage change, per 10 years, working age versus elderly (below).

WESTERN EUROPE

• 455 million or 5.9% of global population

• 12.5% total global energy consumption

• 2020-2030…Working Age depopulation of -5% (-13 million)

Working age Western European population change, per ten years, versus the growth of the elderly population (below).

Percentage change, per 10 years, of working age versus elderly (below).

EASTERN EUROPE

• 295 million or 3.8% of global population

• 7.5% total global energy consumption

• 2020-2030…Working age depopulation of -9% (-16 million)

Working age Eastern European population change, per ten years, versus the growth of the elderly population (below).

Percentage change, per 10 years, of working age versus elderly (below).

NORTH AMERICA+ (US of A / Canada + Australia / New Zealand)

• 397 million or 5.1% of global population

• 21% total global energy consumption

• 2020-2030…Working age population growth of +1.9% (+4 million) down from decade long peak of +19% (+24 million)

US working age population growth over the coming decade is only 1.6% but the relatively higher #’s for Canada, Australia, and New Zealand push up the average (below).

Percentage change, per 10 years, of working age versus elderly (below).

SOUTH AMERICA

• 427 million or 5.5% of global population

• 3.3% global energy consumption

• 2020-2030…Working age population of +7% (+19 million) down from decade long peak of +32% (+40 million)

Working age South American population change, per ten years, versus the growth of the elderly population (below).

Percentage change, per 10 years, of working age versus elderly (below).

Rest of World

(the nations w/ incomes less than $4,000 per capita annually, and average $1,600 in per capita income)

• 3.85 billion or 50% of global population

• 20% of global energy consumption

• 2020-2030…Working age population increase of +19% (+402 million) down from peak of +30% but at all-time high in total persons.

Working age population growth of Africa, Central America, Asia (excluding East Asia), etc. versus the growth of the same elderly populations (below).  The impressive looking population growth here simply does not transfer to any significant rising demand and consumption as these nations are too poor and too dependent on import growth among wealthier nations.  Sadly, these poor nations will only get poorer, following the current economic system.

Percentage change, per 10 years, of working age versus elderly (below).

Final Thoughts:

Over the coming decade, the current growth based system and paradigms will fall by the wayside.  The global trickle-down mantra is already failing, and will entirely come apart.  The impact will be bad for wealthy nations but even worse for poor nations.  The real question is what will replace the current faulty system…and will it be any better?  Invest accordingly.

-Population data from UN World Population Prospects 2019, (utilizing the overly optimistic Medium Variant).

Last Friday stocks took a sharp turn lower following news that VP Mike Pence was set to deliver his long-awaited, twice-delayed China speech today at 11am, at the Wilson Center in Washington, about a year after he harshly criticized Beijing in an address at the Hudson Institute think tank. That speech was widely viewed as the most critical remarks by such a high-ranking U.S. official in recent memory. The address is expected to “reflect on the U.S.-China relationship over the past year and look at the future of our relationship.”

While the tone and sentiment of Pence’s speech are unknown, what is well known is that the vice president has traditionally been an outspoken hawk when it comes to China. As such, as Vital Knowledge pointed out, “If Pence’s speech this Thurs about China is anything like his one from Oct 2018, the markets will NOT be happy”

That may also explain why despite being higher in the pre-market, stocks swooned since opening for trade on Thursday.

Pence’s speech is coming just weeks after President Donald Trump gave a vague outline of the first phase of a deal with Beijing and suspended a threatened tariff hike, signaling a thaw in trade relations between the two countries. But that same week, Washington put Chinese video surveillance firm Hikvision and dozens of other Chinese entities on a blacklist to punish them for the treatment of Muslim minorities, ratcheting up pressure on Beijing over human rights issues.

As such, the risk is that despite the mixed signals, Reuters reported that “many China watchers see Pence’s role as playing “bad cop” on China, so that Trump can shift his tone as he sees fit to strike a deal with Chinese President Xi Jinping.“

So is Pence about double down on his unprecedented China criticism, or will the Veep turn a page after the latest trade war ceasefire? As Bloomberg pointed out a week ago, “if the U.S. purposely planned a speech by Pence calling out China before Trump and Xi meet in November, it won’t help to foster trust.”

If indeed Pence plans on renewing his criticism of Beijing, it won’t help sentiment between the two superpowers, which may be precisely Trump’s intention: consider that in recent days consensus appears to have shifted that US-China diplomatic conditions are improving. However, if the Fed agrees with this, the risk is that Powell will resume hiking just as Trump faces elections in one year’s time, risking another market crash at a critical – for Trump’s reelection – time.

As such, what better way out to extend the Fed’s easing for another 3-6 months than to have “bad cop” Pence slam China, forcing Powell to remain dovish for the foreseeable future, and keeping stocks gravitating new all time highs.

Jay Powell and The Fed have avoided President Trump’s twitter ire for a while, but ahead of next week’s FOMC meeting, the president has come out swinging…

“The Federal Reserve is derelict in its duties if it doesn’t lower the Rate and even, ideally, stimulate. Take a look around the World at our competitors. Germany and others are actually GETTING PAID to borrow money. Fed was way too fast to raise, and way too slow to cut!”

If one looks to the market, it is clear that President Trump is (and will) get what he wants, as rate-cut odds are now almost certain of a cut next week…

Source: Bloomberg

And The Fed is once again inflating its balance sheet in ‘stimulus’ liquidity provision…

Source: Bloomberg

Anything to keep the stock market near highs.

Authored by Bill Blain via Shard Capital,

“You steal a little and they throw you in jail. Steal a lot and they make you King.”

It’s Mario Draghi’s last day chairing an ECB meeting today. End of an era – move along, nothing to see..

Boeing – yet more evidence they are numpties.

I have to accept I am a complete idiot.  

I’ve been so focused on the many trees representing Boeing’s multiple problems: its failure to make planes airlines want to buy, its pursuit of profits and management bonuses over safety, it’s wobbly finances in the wake of unpaid for aircraft, potential fines and claims, plus the loss of credibility – that I missed the forest:  the dismal quality of its management who clearly understood precisely nothing about their company.

The proof is in its Stock Buyback history.  In 2018 it bought back $9 bln of its own shares, and boosted dividends by 20%.  It approved a further $20 bln stock buyback for 2019.  Its stock price has rising pretty much in line with the $40 plus bln in equity its bought back in recent years.

Source: Bloomberg

Conventional logic says companies buy back stock when they perceive it as the most efficient thing to do with their profits.  It’s also an alarm bell warning of unimaginative/poor management.  Perhaps the right thing for Boeing to have done in the mid-2010s would have been to invest $10 bln to develop a new modern smaller regional single airliner?  Instead Boeing’s bosses went with the bull stock market, stuck some bigger engines on the venerable and increasingly unbalanced B-737 and gave it the snappy Max moniker, while awarding themselves bigger bonuses.

The cost of the Max debacle will far exceed $10 bln and could crush the company.  Their failure to invest in the future during times of easy money is the ultimate management failure – failing to ensure the company’s long-term future with new products.  Instead they chased a higher stock price and higher bonuses juiced by the buybacks.  Numpties indeed.  Sack them all.

How many other senior company executives have made the same short-term mistake?  How many were seduced by the rising stock market, access to cheap and easy debt from the bull bond market?  Leverage up companies to push up stock prices?

 The rot goes right across the corporate world. Central banks and politicians are complicit – QE, Austerity, bad regulation… The unintended consequences of the last 10-years are coming back to bite us all.

Tesla – a profit?

Long-term porridge readers know I blow hot and cold on Tesla. It surprised the market to the upside last night, by producing numbers that we’re nearly as bad as the market expected.  It’s on course to sell shy of 400,000 cars this year, which still means it’s a small fry specialist firm.  Yet its valuation would say it’s a world leader.

Declaration: I own 10 Tesla Shares.  I keep them out of curiosity.  They will either be worth nothing or a lot.  I’m just not sure which.  There is massive value in the data Tesla has collected in terms of driverless cars, but I reckon we are years away for that reality.  They dominate the EV sector and forcing everyone else to play catch up – with raises long-term competition issues for them.  Their existing line up of cars is looking tired, but they will intro a new sports next year.  The only thing I’m certain of – Tesla is probably not worth $50 bln.  That doesn’t mean it doesn’t have a future.

I do find it hilarious to view the comments sections on any Tesla story: opinion is extreme – with Telsaphobes or Musk-o-philes and few perspectives inbetween. Some will praise Musk as the greatest visionary of all time, and say they’ve invested their whole pension pot in him. Others call him a con-man.  I’m pretty sure the reality is out there somewhere… (I’d judge Musk by his actions: his disgraceful accusations about the British diver who rescued kids trapped in a cave does not speak in his favour.)

Goldman Sachs..

I read a story this morning about Goldman Sachs sacking a senior banker over compliance violations in the Middle East.  Excellent stuff.  Suggests the Squid is learning.. but far too late.  It’s also the day a couple of former Deutsche Bank traders will face the judge in NY accused of the most heinous crime in financial history – rigging LIBOR!  Anyone with any real understanding knows the charges are bunkum – individual traders wishing for a high or low rate were more than balanced, and the real effect of the “fraud” will have been a rounding error. Yet the authorities are determined that justice is seen to be done and the guilty proven so!

All of which compares rather badly to what’s going on in Malaysia.  I am reading a superb book at the moment. For a racy story and improbable characters, I really can’t recommend better than The Billion Dollar Whale.  (If you can’t find the time, try the BBC’s Channel 4 Storyville: “The PM, The Playboy and the Wolf of Wall Street” for the gist of the story.)  The fact a Malaysian Sovereign Wealth fund got conclusively turned over by the country’s kleptocracy is bad enough, but in the introduction to the book is the line:  “Goldman Sachs has made unfathomably large profits helping the fund raise money”.  It looks like about half the $8 bln Goldman raised for the fund was nicked.

Gosh. Surely not?  Goldman is the universally admired top investment bank, advisor to the rich and powerful and centre of the Davos set…. Someone must have pulled the wool over their eyes?  (US Readers – raised eyebrow (denoting sarcasm) alert.)  That the Vampire Squid Sucking the Face off Humanity (allegedly) might have been duped into ramming its feeding funnel into the Malaysian people’s rainy day development fund must be profoundly shocking to clients of the firm.. but the only surprises for anyone working in professional finance will be they apparently got caught.

In today’s compliance driven banking business it should be 110% impossible to be facilitate, or miss a financial heist on the scale of 1MDB.  But, no. The story confirms its relatively easy. It’s always been easier to steal a couple of billion dollars than it is the steal a loaf of bread.

I won’t go into the whole story – check it for yourself – but I do think the book doesn’t dwell enough on just how deep Goldman’s involvement in the fraud might have been – despite describing the bond deals as “one of Goldman’s biggest ever paydays”.   The book is littered with similar comments about how the bank operated.  I’d like to understand more, but I’m pretty sure the US journalists who wrote have had it explained carefully to them why they should not to go there.

It really doesn’t matter.  Facts are simple.  Goldman was involved.  The only question is how gullible they were, or how guilty might they be?

Goldman’s former star Asian banker and regional chairman Tim Leissner has already pled guilty in the US to Money laundering and bribing foreign officials.  The books says he admitted circumventing compliance because he knew Jho Low, the playboy at the centre of the scandal, was “dodgy”.  Yikes.

Earlier this week Bloomberg carried a story naming Goldman’s top HK banker, Andrea Vella, currently on a break “preparing for a triathalon” from the bank, as “Co-Conspirator No 4” in the investigation of the fraud in Malaysia.  Court documents says he was briefed on plans to pay bribes and kickbacks to ensure the Fund was able to raise bond finance, for which Goldman was paid extraordinarily high fees for what should have been a quasi-sovereign deal.

Goldman apparently earned 8% fees on $8 bln of effectively SSA bond debt it raised for 1MBD.  That should have set alarm bells ringing.  Vella arranged the deals.  Goldman’s ex-employee Leissner has told US investigators the he and others arranged the fundraising for 1MBD as bond issues specifically to generate higher fees. Who was asking questions internally about it?  He’s said a lot of other things – allegedly.  (Thanks Mr Hislop for reminding me to add that qualifier.)

I suspect the book and its allegations must be true-ish – the efforts made to prevent its publication were extraordinary.  Being gullible of allowing fraud, or being guilty of fraud are both financial crimes.  Has Goldman been punished?  I even read the US Department of Justice is investigating Deutsche Bank over a former Goldman Sacks banker involved in the story its hired.  I was wondering how long it would take for DB to be implicated.

And that’s the really interesting thing…  Can you imagine how the US authorities would be reacting to a European bank so clearly wrapped up – either for being gullible or guilty – in something as fraudulent as 1MDB?  They would have been fined for gross incompetence or for facilitating it.  If it was Deutsche Bank, HSBC or Barclays, I bet my bottom dollar they’d already have paid fines in double digit billions.  But this is Goldman.  So That’s different.  Isn’t it?

Thus far Goldman does not appear to have paid any fines in relation to the case.  At one stage the Malaysian Government was looking for Goldman to divvy up about $7 bln to settle the case for “misreprenting to investors” the proceeds of the bond sales would be used for legitimate purposes, although the latest rumours say a $3.3-2 bln settlement is more likely.  Although the bank intends to “vigorously defend itself”, a settlement that ends the investigation will be great news for the 17 Goldman executives currently under investigation by the Malaysians for their involvement in the trades underlying the fraud.  The US DoJ say they are investigating.

On the much wider global scale, zoom out and look at this in terms of all the other things now breaking across markets: the collapse and bust of the hollow WeWork model, the fact Boeing isn’t making any planes airlines want to buy and has potentially fatally wrecked its future, Nissan and Renault self-destructing over pride, or Saudi Aramco failing to convince investors their fossil fuel based business is worth as much as they think it is.  Snapshots of disintegrating business entitled capitalism?

Goldman is a bank with a reputation for making money.  The fact they are being exposed for not particularly caring how… well that’s for their clients to opine on and for markets to value in terms of their stock price.  Seller.  

*  *  *

Blain’s Financial Porridge Podcast on Website (Subscribe to Audioboom podcast or go via Spotify or iTunes (Other channels available from Audioboom).  Book: The Fifth Horseman – How to Destroy the Global Economy, is on Amazon in Kindle or book format.

With mortgage applications plunging (on just a modest rise in mortgage rates) and a disappointing tumble in existing home sales, new home sales were expected to slow in September (after a huge bounce in August) and they did (but less than expected thanks to a downward revision).

August’s 7.1% MoM spike was revised lower to a 6.2% rise which left September’s 701k new home sales SAAR down 0.7% MoM.

Source: Bloomberg

The YoY rise in new home sales slowed…

The supply of homes at the current sales rate held at 5.5 months, unchanged from the prior period.

The number of new homes for sale decreased for a fourth month, to 321,000.

Very notably, the median home price plunged 8.8% from a year earlier to $299,400 – to its lowest since Feb 2017…

Purchases of new homes declined in three of four U.S. regions, led by the West and Northeast. The Midwest rose.

Let’s just hope rates don’t inch higher any further…

Source: Bloomberg

 

Authored by Lance Roberts via RealInvestmentAdvice.com,

At the beginning of August, I discussed the following tweet from the President:

What the Market wanted to hear from Jay Powell and the Federal Reserve was that this was the beginning of a lengthy and aggressive rate-cutting cycle which would keep pace with China, The European Union and other countries around the world….

— Donald J. Trump (@realDonaldTrump) July 31, 2019

“But if it is the ‘strongest economy ever,’ then why the need for aggressive rate cuts which are ’emergency measures’ to be utilized to offset recessionary conditions?”

The following chart should quickly put that claim to rest.

While the claims of an exceptionally strong economy rely heavily on historically low unemployment and jobless claims numbers, historically high levels of asset prices, and strong consumer spending trends, there is an underlying deterioration that goes unaddressed.

For example, while reported unemployment is hitting historically low levels, there is a swelling mass of uncounted individuals that have either given up looking for work or are working multiple part-time jobs. This is shown by those “not in labor force” as a percent of the working-age population, which has skyrocketed since the recession.

The employment to population ratio would not still be at levels from the 1980s.

If employment was indeed as strong as reported by government agencies, then social benefits would not be comprising a record high of 22% of real disposable incomes. Here is the breakdown:

• 40 million Americans on food stamps

• An estimated 50% of the 330 million Americans in this country get at least one federal benefit, according to the Census Bureau.

• An estimated 63 million get Social Security; 59.9 million get Medicare; 75 million get Medicaid; 5 million get housing subsidies; and 4 million get Veterans’ benefits.

Those numbers continue to rise.

Without government largesse, many individuals would literally be living on the street. The chart above shows all the government “welfare” programs and current levels to date. While unemployment insurance has hit record lows following the financial crisis, social security, medicaid, veterans’ benefits, and other social benefits have continued to rise and have surged sharply over the last few months.

With 1/5 of incomes dependent on government transfers, it is not surprising that the economy continues to struggle as recycled tax dollars used for consumption purposes have virtually no impact on the overall economy.

In fact, in the ongoing saga of the demise of the American economy U.S. households are now getting more in cash handouts from the government than they are paying in taxes for the first time since the Great Depression. This, of course, at a time when the current administration is more enthralled with trying to find some universe where cutting taxes actually increases tax revenues as a percent of GDP rather than actually cutting spending.

In 2018, households received $2.2 trillion in some form of government transfer payments, which was more than the $1.7 trillion paid in personal income taxes.

“Yes, but wages are now the highest ever.”

Fair enough, but if that were truly the case, then why are transfer payments as a percent of disposable personal income still hanging near its highs from the “Great Recession?”

In the “strongest economy in history,” American’s should be earning a bulk of the income from their labor, rather than from Government handouts. This is why, despite tax cuts, tax revenue growth has waned as the economy has remained weak.

You simply can’t create economic growth by recycling tax dollars. 

In short, Americans have the government, not private enterprise, to thank for their wealth growth – but, of course, there are massive implications to this.

 

As I noted in our recent discussion on the fallacy of the “savings rate:”

“The ‘gap’ between the ‘standard of living’ and real disposable incomes is shown below. Beginning in 1990, incomes alone were no longer able to meet the standard of living so consumers turned to debt to fill the ‘gap.’ However, following the ‘financial crisis,’ even the combined levels of income and debt no longer fill the gap. Currently, there is almost a $2654 annual deficit that cannot be filled.”

That gap explains why consumer debt is at historic highs and growing each year.

Furthermore, if more households have the government to thank for their wealth, does that mean those households are more inclined to re-elect politicians who are pushing for more government handouts? 

The answers to that question is quite obvious if you look at the candidates currently running for President on the Democratic ticket.

The bottom line is that America can’t grow its way back to prosperity on the back of social assistance. The average American is fighting to make ends meet as their cost of living rises while wage growth largely remains stagnant.

This brings us to the hard truth.

The budget deficit is set to grow over the next few years as interest payments alone absorb a chuck of the tax revenue. This comes at a time when that same dollar of tax revenue only covers entitlement spending as 75 million baby boomers begin their migration into the social safety net.

The call by the American people at the last election was a mandate to reduce the size of government and spending, however, that has fallen on deaf ears and weak stomachs. The current electorate is log jammed by personal agendas as the White House elected to cut taxes, increase defense spending, and exacerbate the crony-capitalism which currently plagues the country.

By the way, the only other time government income support exceeded taxes paid was during the “Great Depression” from 1931 to 1936.

Strongest economy ever? Hardly.

But it could be.

Today, we have the ability to choose our battles, make tough choices, and restore the economic balance for future growth. However, 800-years of history tells us that we will fail to make those choices, and at some point, those choices will be forced upon us.

After September’s bounce, expectations for preliminary US PMIs in October are mixed (better for Services, worse for Manufacturing) as Eurozone PMIs stagnated at multi-year lows this morning.

In the US, the flash October data was better than expected…

• US Manufacturing PMI 51.5 (51.1 prior, 50.9 exp)

• US Services PMI 51.0 (50.9 prior, 51.0 exp)

This is the 2nd month in a row of rebound…

Source: Bloomberg

However, Employment tumbled to 47.5 vs 48.6 in September, the lowest reading since Dec. 2009 (and second consecutive month of contraction) and new business falls vs prior month (lowest reading since series began).

With US macro surprise data increasingly disappointing, we wonder how long this shallow bounce can be sustained.

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit, said:

“Despite business activity lifting from recent lows, the survey data point to annualized GDP growth of just under 1.5% at the start of the fourth quarter, and a near-stalling of new order growth to the lowest for a decade suggests that risks are tilted toward growth remaining below trend in coming months.

Additionally, Williamson notes…

“An increased rate of job culling adds to the gloomy picture, with jobs being lost among surveyed companies at a rate not seen since 2009. At current levels, the survey’s employment gauge indicates non-farm payroll growth slipping below 100,000.

“The overall subdued picture reflects a spreading of economic weakness from manufacturing to services, but encouragingly we are now seeing some signs of manufacturing pulling out of its downturn, in part driven by a return to growth for exports and improved sentiment about the year ahead, linked to hopes that trade war tensions are starting to ease.

“If manufacturing can continue to gain momentum this should hopefully feed through to stronger jobs growth and an improved service sector performance, leading to better GDP growth, but it remains too early to determine whether the economy has truly turned a corner.”

Is this rebound enough to stall The Fed’s dovish rate-cycle hopes?

While yesterday’s closing ramp was ‘triggered’ by The Fed hiking the size of its liquidity bailouts, it appears the US market open was all the algos needed to dump their overnight gains…

While there was no immediate catalyst (other than the huge size of liquidity demands suggesting there is something The Fed is not telling us), some suggested Mario Draghis’ farewell press conference was disappointingly un-dovish and topped off by him suggesting that “the ECB must be cautious in its communication to the broad public.”

Which sounds a lot like Juncker’s “when it’s serious, you have to lie” comment.